Calculate the gain achieved through the merger

Reference no: EM13299474

Company A is thinking about buying and then merging with Company B. At the moment the yearly growth rate of Company B is 4% but after the merger the expected growth rate is 5% without a need for additional investments.
These numbers are available concerning the two companies:

Company A
Earnings per share $1,25
Dividend per share $0,85
Shares outstanding 6 000 000
Share price $12,00

Company B
Earnings per share $1,80
Dividend per share $1,20
Shares outstanding 2 500 000
Share price $15,00

a.) Calculate the gain achieved through the merger.
b.) What are the costs for the merger if the buying price for one Company B share is $16,50?
c.) What are the costs of the merger if the owners of B get 11 shares from Company A per 8 shares?
d.) How would the answers to b and c change if the merger did not create an increased growth rate after all?

Reference no: EM13299474

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